Does an over-emphasis on faster time to market mean undermining cost and quality?

Pratistha Suhasini October 31, 2016

bwiglobalization1.jpgIt is better to rise from life as from a banquet - neither thirsty nor drunken.

-Aristotle

In the present day dynamic era of aggressive globalization, product reach is no longer limited to local markets. The geographical boundaries of operation have been eliminated and now the reach is unlimited. This presents manufacturers with varied opportunities for entering unexplored markets and strive towards sustainable revenue growth. 

While all the players jostle for market space, one factor that helps them stand apart is the time at which they reach market. It’s no wonder that time to market is one of the most crucial factors to improve competitive advantage. But, that’s just one of the crucial factors in the pivotal triple constraints of time-cost-quality. So, what impact do cost and quality have on the product success?

In our last few blogs on solving the crisis of improving time to market, we have discussed how the need for customization and faster time to market must be balanced and one factor cannot take priority over the other. In this blog, we will see how the time to market factor fairs against cost and quality.

cost_reduction.jpgProduct cost is the total cost incurred in creating a product. A breakup of the total product cost would be like this:

Total Product Cost = Direct Labour + Direct Material + Indirect Overheads.

This is one of the key factors in determining the pricing strategy. Competitively priced products provide manufacturers with the opportunity to acquire larger market share, establish profitable territories and reap huge margins.

Product decisions taken in the early design phase have a great impact on the engineering and manufacturing efficiency. More than 70% of total product cost is influenced by these decisions. So, cost optimization in the design, engineering and manufacturing phase dictates the overall product cost. Controlling the product cost not only allows the manufacturer to plan for better product pricing, but also results in significant cost savings and unleash higher revenue potential.

On the other hand, if cost is side-lined to emphasize the need for faster time to market, there can be multiple repercussions. Higher costs incurred in product design and development can add up quickly and increase the total product cost significantly, thus making competitive pricing a challenge. So, even if a product reaches the market faster, it could be challenge to justify the pricing. The manufacturer may not be in a position to play an aggressive pricing game and has to lose out to competitors on market share. In another scenario, if manufacturer prices products matched to the competitor’s, the margins would be insignificant since cost incurred is already high. Unfortunately, it becomes a double edged sword.

Quality_ball.pngLet’s see product quality now. It is defined by a set of characteristics like conformance to standards, performance, reliability, ease of use and so on. It is one of important parameters in a buying decision. Delivering good quality products consistently, results in better brand loyalty and increased value. This can have a great positive impact on product pricing. Higher brand value gives manufacturer or brand owner the ability to command a higher pricing for their products in the market.

If quality takes a back seat to the need for faster time to market, the results can be very discouraging for product owners. In a hurry to reduce the delivery time and reach the market faster, quality of deliverables can be at risk. Lack of quality in the products can result in backlash from the market in the form of unsatisfied customers and thus gradual decline of market share. Poor quality will also results in a lot of products recalls which would add on to the costs incurred and ultimately decrease in brand value. This scenario will have huge negative impact on sales and would badly hit the revenue numbers.

So, it is very evident that no single factor in the ‘triple constraint’ trio can be super-emphasized and the others neglected. A balance between the three constraints is the key to sustainable profits and revenue growth.

Four product engineering approaches to drive faster time to market

 

Topics Product Quality Product Cost Optimization Time to Market